Weekly Market Wrap: D-Street tumbled for a second straight week amid global uncertainties. What lies ahead?

Bears strengthened their grip over Dalal Street with frontline indices tumbling two and a half per cent during the passing week as traders continued to remain worried over the Israel-Hamas conflict which created an environment of uncertainty and put pressure among global stock markets. Rising US Treasury yields along with higher crude prices also dampened sentiments. 

These signals led the BSE Sensex to fall 1615 points, or 2.47 per cent, at 63,783 during the week ended on October 27, while the Nifty slipped 495 points, or 2.53 per cent, to 19,047. Sector-wise, the BSE Realty index declined the most (3.2 per cent) during the week gone by. While BSE Teck and BSE Capital Goods indices have registered a loss of 3.1 per cent, and 3 per cent, respectively. On the other hand, not a single major sectoral benchmark had given positive returns. 

Only 3 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a weekly gain of 2.2 per cent, Axis Bank emerged as the top gainer in the index. It was followed by HCL Technologies (0.8 per cent), and Coal India (0.5 per cent).

On the other hand, UPL, JSW Steel, and HDFC Life Insurance Company declined 7.4 per cent, 5 per cent, and 4.9 per cent, respectively.    

Market Macros   

Vinod Nair, Head of Research at Geojit Financial Services said, “Ongoing unrest in West Asia and concerns over the potential impacts of higher interest rates on future economic growth have resulted in a decline in investor confidence”. FIIs selling is affecting the domestic market invariably to heavy buying by DIIs. Domestic indices have displayed some recovery on the last trading day of the week due to favourable US Q3 GDP growth and moderating US inflation leading to a moderation in bond yield. Decent Q2 results in India, which were in line with optimistic estimates, may also support the market's rebound.  

He added that the volatility of the global market is expected to delay the recovery trend of the domestic market since the global market is focused on the risk of further slowdown of the global economy due to elevated interest rates and geo-political tension. Amidst the ongoing market consolidation, sectors such as FMCG, consumption, fertilizers, and core segments like infrastructure and housing are expected to present potential growth opportunities. 

Contributing factors include the mitigation of risks associated with raw material costs and a stable long-term demand outlook from external sectors, which may specifically support sectors like Chemical and Pharma in the medium term. “In the short-term, market sentiment remains cautious, with investors closely monitoring developments in West Asia, upcoming corporate earnings, and key economic data, including domestic PMI figures; to be announced next week”, Nair said. 

Technical Outlook   

Rupak De, Senior Technical analyst at LKP Securities said, that after relentless selling in recent days, the Nifty has temporarily paused its decline due to an oversold chart setup. However, the index closed significantly below the critical breakdown level of 19250. As long as it stays below 19250, the market may continue to be inclined towards selling on any upward movements. 

“On the downside, a resumption of weakness is expected if the index falls below 18800. This is because put writers are likely to defend the Nifty with substantial positions at 18800, with immediate support placed at 19000." De said. 

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